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Does Expanding Health Insurance Beyond Formal-Sector Workers Encourage Informality? Measuring the Impact of Mexico's Seguro Popular

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Author Info

  • Aterido, Reyes

    ()
    (World Bank)

  • Hallward-Driemeier, Mary

    ()
    (World Bank)

  • Pagés, Carmen

    ()
    (Inter-American Development Bank)

Abstract

Seguro Popular (SP) was introduced in 2002 to provide health insurance to the 50 million Mexicans without Social Security. This paper tests whether the program has had unintended consequences, distorting workers' incentives to operate in the informal sector. The analysis examines the impact of SP on disaggregated labor market decisions, taking into account that program coverage depends not only on the individual's employment status, but also on that of other household members. The identification strategy relies on the variation in SP's rollout across municipalities and time, with the difference-in-difference estimation controlling for household fixed effects. The paper finds that SP lowers formality by 0.4-0.7 percentage points, with adjustments largely occurring within a few years of the program's introduction. Rather than encouraging exit from the formal sector, SP is associated with a 3.1 percentage point reduction (a 20 percent decline) in the inflow of workers into formality. Income effects are also apparent, with significantly decreased flows out of unemployment and lower labor force participation. The impact is larger for those with less education, in larger households, and with somebody else in the household guaranteeing Social Security coverage. However, workers pay for part of these benefits with lower wages in the informal sector.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5996.

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Length: 41 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5996

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Keywords: informality; Seguro Popular; Mexico; non-contributory social programs; social assistance;

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References

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  1. Laura Juarez, 2008. "Are Informal Workers Compensated for the Lack of Fringe Benefits? Free Health Care as an Instrument for Formality," Working Papers 0804, Centro de Investigacion Economica, ITAM.
  2. Azuara, Oliver & Marinescu, Ioana, 2011. "Informality and the expansion of social protection programs," MPRA Paper 35073, University Library of Munich, Germany.
  3. Mariano Bosch & William Maloney, 2006. "Gross Worker Flows in the Presence of Informal Labor Markets. The Mexican Experience 1987-2002," CEP Discussion Papers dp0753, Centre for Economic Performance, LSE.
  4. Adriana Camacho & Emily Conover & Alejandro Hoyos, 2009. "Effects of Colombia's Social Protection System on Workers' Choice between Formal and Informal Employment," DOCUMENTOS CEDE 006003, UNIVERSIDAD DE LOS ANDES-CEDE.
  5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  6. Carmen Pages & Lucia Madrigal, 2008. "Is Informality a Good Measure of Job Quality? Evidence from Job Satisfaction Data," Research Department Publications 4603, Inter-American Development Bank, Research Department.
  7. Carmen Pagés-Serra & Marco Stampini, 2007. "No Education, No Good Jobs?: Evidence on the Relationship Between Education and Labor Market Segmentation," IDB Publications 4121, Inter-American Development Bank.
  8. Leonardo Gasparini & Francisco Haimovich & Sergio Olivieri, 2007. "Labor Informality Effects of a Poverty-Alleviation Program," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0053, CEDLAS, Universidad Nacional de La Plata.
  9. Raymundo M. Campos-Vazquez & Melissa A. Knox, . "Social Protection Programs and Employment: The Case of Mexico's Seguro Popular Program," Working Papers UWEC-2011-10, University of Washington, Department of Economics.
  10. Sandra G. Sosa-Rubi & Omar Galarraga & Jeffrey E. Harris, 2007. "Heterogeneous Impact of the "Seguro Popular" Program on the Utilization of Obstetrical Services in Mexico, 2001-2006: A Multinomial Probit Model with a Discrete Endogenous Variable," NBER Working Papers 13498, National Bureau of Economic Research, Inc.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Mandatory health insurance and informality
    by Economic Logician in Economic Logic on 2011-10-05 14:00:00
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Cited by:
  1. Alderman, Harold & Yemtsov, Ruslan, 2012. "Productive role of safety nets : background paper for the World Bank 2012-2022 social protection and labor strategy," Social Protection Discussion Papers 67609, The World Bank.
  2. Alejandro Del Valle, 2013. "Is Formal Employment Discouraged by the Provision of Free. Health Services to the Uninsured ? Evidence From a Natural Experiment in Mexico," PSE Working Papers halshs-00838000, HAL.
  3. Holzmann, Robert, 2013. "A Provocative Perspective on Population Aging and Old-Age Financial Protection," IZA Discussion Papers 7571, Institute for the Study of Labor (IZA).
  4. Bruhn, Miriam, 2012. "A tale of two species : revisiting the effect of registration reform on informal business owners in Mexico," Policy Research Working Paper Series 5971, The World Bank.
  5. Holzmann, Robert, 2012. "Global pension systems and their reform : worldwide drivers, trends, and challenges," Social Protection Discussion Papers 68934, The World Bank.
  6. Camacho, Adriana & Conover, Emily & Hoyos, Alejandro, 2013. "Effects of Colombia's social protection system on workers'choice between formal and informal employment," Policy Research Working Paper Series 6564, The World Bank.
  7. repec:hal:wpaper:halshs-00838000 is not listed on IDEAS
  8. Wagstaff, Adam & Manachotphong, Wanwiphang, 2012. "Universal health care and informal labor markets : the case of Thailand," Policy Research Working Paper Series 6116, The World Bank.
  9. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 32(5), pages 938-950.
  10. François Gerard & Gustavo Gonzaga, 2013. "Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil," Textos para discussão 608, Department of Economics PUC-Rio (Brazil).
  11. Mariano Bosch & Marco Manacorda, 2012. "Social Policies and Labor Market Outcomes in Latin America and the Caribbean: A Review of the Existing Evidence," CEP Occasional Papers 32, Centre for Economic Performance, LSE.

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  1. Economic Logic blog

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